You use the Investment sale section of the program. Where asked you would indicate this was a second home and that it was inherited. The Form 1099-S is not entered on the tax return but the information on the form is used.
Note the the Schedule D and Form 8949 for reporting this sale are not yet finalized. They are scheduled to be available on 01/14/2021 (subject to change)
To enter an investment sale other than from a brokerage account (1099-B), follow the steps below.
- Click on Federal Taxes (Personal using Home and Business)
- Click on Wages and Income (Personal Income using Home and Business)
- Click on I'll choose what I work on (if shown)
- Under Investment Income
- On Stocks, Mutual Funds, Bonds, Other, click the start or update button
Or enter investment sales in the Search box located in the upper right of the program screen. Click on Jump to investment sales
Does this mean I will be taxed on the entire amount? I am splitting proceeds of sale with my 3 brothers. Does it matter the sale was for 85k only?
If the Form 1099-S you received is only for your portion of the proceeds, then that is what you will enter. The home cost would be the Fair Market Value on the day your parent passed. You would enter 1/4 of that value as the cost of the home (since the home sale was split 4 ways) and the date of death for the deceased as the date it was acquired.
If your parents quitclaimed their home to you before their passing, for tax purposes it is NOT treated as an inheritance.
The importance of this is that when you sell, the cost basis of the property will NOT be its FMV at the time of their deaths. Instead, it will be their original cost of the home (plus capital improvements). Unfortunately this can leave you with a much larger tax bill than if they had left the property to you after their deaths.